Cleanwrap, a South Korean company known for its plastic wrap and sanitary gloves, has filed for receivership. This development follows a week after a management dispute lawsuit involving the late founder, Jeon Byung-soo, and his two sons concluded in favor of the elder son, Jeon Ki-young.
Investment banking and legal insiders reported on April 17 that Cleanwrap had applied for corporate rehabilitation at the Seoul Rehabilitation Court on April 4. The court, which had previously issued a comprehensive injunction and conservatorship on April 9, is scheduled to decide whether to proceed with the rehabilitation after a hearing on April 22.
Despite last year’s revenues of 170 billion won and assets exceeding liabilities—with $100 million (14 billion won) in assets against $68 million (9.4 billion won) in liabilities—only $47 million (6.5 billion won) represented current assets, which are assets that can be converted into cash in a short period. It is unusual for a company like Cleanwarp to seek rehabilitation. The company noted in its financial statements that it has adequate cash and receivables to cover expected operating costs, including debt payments.
The decision to file for receivership is speculated to stem from ongoing management disputes. Under receivership, shareholder rights are significantly curtailed, with a court-appointed receiver authorized to manage and, if necessary, liquidate the company’s assets. The rehabilitation plan might involve selling or canceling existing shares and issuing new ones to modify company control. The CEO, Chairman Jeon’s second son, holds a 17.33% stake, while the eldest son owns 76.36%.
The conflict began with a 210,000-share gift from Chairman Jeon to his eldest son, which led to allegations of coercion and assault by the father against the son concerning the transfer of shares for succession purposes. The eldest son maintained that the shares were a legitimate gift.
The initial trial ruled favor the younger Jeon, requiring his elder brother to return the disputed shares. This decision made the younger Jeon the CEO in 2022. However, this ruling was reversed on appeal, and the Supreme Court upheld the reversal on March 28. Chairman Jeon Byung-soo passed away in 2020 amid the legal battle.
